Capital Gains Tax on multiple property sale

[Lozsale]

I am currently serving in the Army and therefore live in Forces Accommodation. My wife and I purchased a property for £85,000 five years ago and have let it for the period to date. We purchased a second property in Sep 05 for £135,000 which is also let. I have now moved both morgages to 'Buy-to-Let (in case that has a bearing). I intend to build my portfolio until such time as I leave the Army so that I can invest any profit made into our own property in which we will take up residence for retirement.

Am I liable to pay CGT on all properties when sold if the profit is re-invested in another property?

Many thanks

[Tax Accountant]

I am currently serving in the Army and therefore live in Forces Accommodation. My wife and I purchased a property for £85,000 five years ago and have let it for the period to date. We purchased a second property in Sep 05 for £135,000 which is also let. I have now moved both morgages to 'Buy-to-Let (in case that has a bearing). I intend to build my portfolio until such time as I leave the Army so that I can invest any profit made into our own property in which we will take up residence for retirement.

Am I liable to pay CGT on all properties when sold if the profit is re-invested in another property?

Many thanks

The simple answer is YES.

However, you should read the Inland Revenue Help Sheet IR283 downloadable from the Inland Revenue website. In particular, you should be aware of the details under the paragraph headed ''Job-related accommodation''. If necessary, you should take professional advice in this respect. It may be that you intended to occupy the 1st property as your main residence and that this intention has now changed to your 2nd property. In this event, it may very well turn out that your original property is exempted to-date (plus the final 3 years ownership) as your PPR even if you haven't lived there at all. Furthermore, your 2nd property may then start qualifying until you change your intention again.

It is best to get your thought process clear so that you don't lose the valuable PPR relief due to ignorance or carelessness.

If you are not clear, I strongly urge you to seek professional advice without undue delay. This is in your best interests. Believe me, this will be money well spent.

Ramnik